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Record prices boost Minn.'s copper-nickel projects

Record prices for copper are helping to fuel controversial new efforts to mine the red metal in Northern Minnesota.

Copper set new records earlier this year and continues trading near record highs of over $4.40 a pound, pushing cash into northeast Minnesota's developing copper-nickel projects.

PolyMet Mining's Hoyt Lakes project just got a $30 million Canadian cash-for-stock infusion from Swiss-based mining concern Glencore AG. A separate copper-nickel project near Ely drew a $77 million Canadian buyout.

The high prices also have boosted business for companies like Superior, Wisconsin's TLK Industries, where a mechanical press slowly compacts a spaghetti-like pile of used copper wire. The strands come out in a rectangular block held together by metal bands. The company will receive about $15,000 for a 4,000-pound shipping container of copper.

TLK Industries owner Andy Karon said metals like aluminum and steel are doing well too. But the amount he can pay for scrap copper has soared.

"Percentage wise, copper is really doing the big thing," Karon said. "We're paying four times what we were paying two years ago for the exact same material."

Copper at TLK IndustriesMPR Photo/Derek Montgomery

The surging world-wide demand for copper, which has surged ahead the world's supply, will keep copper prices high just as the demand for gold sparked prices last year, said Tony Barrett, an economist at Duluth's College of St. Scholastica.

"The fundamentals are there for higher prices from a year or two ago, and for that to be sustained," Barrett said. "That's why these companies are going ahead with their projects in northern Minnesota."

Used widely in electrical transmission, manufacturing and housing, copper is considered a bellwether of economic activity. Developing economies in China, India and Brazil are driving world demand.

University of Minnesota-Duluth economist Jim Skurla agrees that continued strong prices are likely. But he said some observers are starting to question whether current prices are sustainable.

"Are we looking at another bubble, just like we saw in the housing market?" Skurla asked. "The possibility of a copper bubble is definitely out there."

Skurla said high prices will push copper users to seek substitute materials. Eventually, copper prices will stabilize or drop -- but the floor price will still remain well above recession levels two years ago, he said.

However, one market bear thinks copper is already dangerously over-priced.

TLK Industries interiorMPR Photo/Derek Montgomery

"One of my huge concerns about the commodity markets in general and copper in particular, that it's being driven by speculative money -- not by [a] genuine increase in consumer demand," said David Threlkeld, a commodities trader in Arizona.

Threlkeld said China is buying more copper than it can use; and some of the buying is by private Chinese investors speculating on copper prices. He compares copper today with housing a couple years ago.

"What drove the price of houses is speculative buying," he said. "They all thought that this could never end. But things always end."

Threlkeld predicts a big correction with big losers, including mining projects like those getting underway in Minnesota.

Not so says, Christopher Dundas, CEO of Twin Metals, which plans an underground copper-nickel mine in the Ely-Babbit area.

Copper in TLK IndustriesMPR Photo/Derek Montgomery

"Copper is very much correlated to the overall economic health of the world economies, and the U.S. is just starting to get rolling again," Dundas said. "So that's going to increase copper consumption."

Dundas notes the metal's importance in the power grid: electric cars; wind turbines and solar panels.

"I think the forecast is looking pretty positive in terms of where the price of copper is going," he said.

Twin Metals is still several years out from production, but PolyMet Mining may have operating permits late this year and could start turning dirt shortly after that.

Gallery

Sheet copper sits in a box awaiting a buyer at TLK Industries in Superior, Wis. TLK Industries owner and president Andy Karon said sheet copper doesn't sell for as much as other copper since it's so thin and much of it is lost in the melting process.MPR Photo/Derek MontgomeryView full galleryCopper references were plentiful on the walls at TLK Industries in Superior, Wis.MPR Photo/Derek MontgomeryNorm Hudson operates a baler standing near a fresh load of copper wire that was just dropped off at TLK Industries in Superior, Wis on Wednesday, Jan. 26, 2011. A baler compresses material so that TLK can fit more material inside boxes that go out to copper buyers.MPR Photo/Derek Montgomery